Some Northeast Ohio real estate leaders say that fewer local properties are making it into the multiple listing service, a longtime system designed for sharing information, and compensation, between real estate companies. Critics believe the growth of these off-market listings hurts consumers, giving sellers less visibility and showing buyers only a slice of what's actually for sale. Associated Press file

CLEVELAND, Ohio -- Your neighbor's house might not pop up in a search of real estate listings. But that doesn't mean it's not for sale.

Some Northeast Ohio real estate leaders say that fewer local properties are making it into the multiple listing service, a longtime system designed for sharing information, and compensation, between real estate companies. Critics believe the growth of these off-market listings hurts consumers, giving sellers less visibility and showing buyers only a slice of what's actually for sale.

As agents hold back homes, their competitors are likely to follow suit, creating more distrust and secrecy in an already cutthroat business. And when these listings don't make it into the MLS, they're not available to be used as comparable properties for appraisals, other sales or mortgage refinancing - yielding a skewed picture of the market.

"We see this as a tremendous disservice to our clients," Jeff Russell of Russell Real Estate Services in North Ridgeville said of what he and others describe as a worrisome potential trend. "In my opinion, it's limiting the exposure of listings to the market and trying to keep a bigger piece of the pie for yourself. While it might be good for the broker, it's not good for the consumer."

Off-market listings aren't new. Seeking privacy, celebrities, corporate executives and owners of high-end homes favor limited marketing and more restrictions on who traipses through their homes. These deals, sometimes called "pocket listings" because brokers tuck them away, are allowed by the profession - if the seller signs off.

But for Russell and other Realtors, recent chatter about off-market deals raises questions about whether agents who pocket their listings care more about making money, and keeping every part of the transaction in-house, than fulfilling their foremost duty: To sell a home at the highest possible price.

"The perception is that someone may not be doing their client proper representation by only keeping (the listing) for their company, instead of really providing it to the broader market, where you would think it could command a higher price," said John Lynch of Keller Williams Realty Greater Cleveland West.

Several real estate agents vented private frustrations but balked at talking publicly, citing fears about being barred from the inner circle of people told about these off-market deals - often among the best properties available.

Some members of the NORMLS board of governors say pocket listings are up significantly. Lynch and Russell, who are both board members, said the organization is discussing the issue and evaluating whether the 5,600-member listing service needs to change its rules to leave fewer opportunities for off-market deals.

In the Cleveland area, Realtors have 72 hours to add their new listings to the MLS. Otherwise, they face penalties and fines.

But if a seller signs off, a listing doesn't have to be shared. Instead, an agent can advertise that home to a group of close associates, list it on his company's website or market the property by email, phone or word of mouth.

"It's an issue that's been brought up, and we're going to be looking at it," Lynch said. "I don't know how widespread it is among companies. I'm not going to mention a company or companies."

The president of Howard Hanna Ohio, the biggest player in the Northeast Ohio real estate market, scoffed at the notion that pocket listings are hurting the industry. Howard "Hoby" Hanna acknowledged that some real estate agents might use a property's off-market status, with its sense of exclusively, as a marketing tool.

"It's to create that urgency in the marketplace and say we're going to market this internally," he said. "Some agents do do that, but the sellers know about it and the sellers see it as a value."

Hanna said what matters is getting the sale done - not whether the property is marketed through the listing service. His biggest concern is that pocket listings, once they're sold, never make it into the MLS. So other homeowners, buyers and agents have a harder time citing them as comparable sales or pointing to them while refinancing.

Agents who sell off-market properties can't go back later and ask the listing service to amend its records to include those transactions. Hanna objects to this, adding that his company is encountering more such situations as deals come together and agents don't have time, or don't remember, to add properties to the MLS.

"I'm not actively telling anybody to do that," said Hanna, who also sits on the NORMLS board. "So this Howard Hanna isn't telling anybody to do that. I'm not really sure how anybody could tell what we are, or aren't, doing. I'm not sure what discussions take place among agents."

From informal agreements between cooperating real estate agents, the MLS system grew into a business-to-business tool meant to increase cooperation and transparency in the industry. Now the Internet enables listing services including NORMLS to push information about available properties, sales and market trends out to national real estate websites, media outlets and, by extension, consumers.

Still, there are several reasons, besides privacy, that a homeowner might want to keep a property out of the multiple listing service.

"Certainly it's not illegal to do that," said Peg Ritenour, vice president of legal services and administration for the Ohio Association of Realtors. "It kind of all goes back to the seller. I know you're getting comments from brokers, but they're not privy to those discussions between the seller and their agent."

Though some Northeast Ohio properties get snapped up quickly, others sit for months, or years. The MLS tracks the number of days a house stays on the market, though Realtors sometimes try to game the system by pulling a listing and reintroducing it later. Some sellers don't want their homes listed publicly, to avoid having a listing that lingers and looks stale. In some cases, homeowners have an informal arrangement with an agent. If the right deal comes along, the house is for sale.

"You can't put a gun to somebody's head to make them put their listing in the MLS," said Barbara Kohl, executive vice president of the West Penn Multi-List, a 6,000-member listing service covering Pittsburgh and southwestern Pennsylvania. "You have a right as a homeowner. But what we want to make sure of is that the agent is really acquiescing to the homeowner's wishes."

Kohl said pocket listings are rare in the West Penn Multi-List, which requires agents to put available properties in its system within 48 hours. There's been no recent jump in off-market activity, she added.

Opponents of pocket deals say sharing listings with the entire industry means there are more eyes on that property. With more real estate agents and their buyers looking, a house is more likely to fetch a higher price.

But if an agent markets a listing internally, there's a better chance of keeping every part of a sale in-house. That means one company could pick up the full commission and, potentially, grab the title work and mortgage work for the transaction.

"If I wanted to play that way, it would be a lot better for my business," said Tony Kazanas of Realty Professionals in Westlake. "But it wouldn't be better for the consumer."

The Ohio Department of Commerce, which regulates the real estate industry, has not received any formal complaints about pocket listings. But Anne Petit, superintendent of the division of real estate and professional licensing, said the department did receive an inquiry about the issue in October. She would not discuss details but said the division is not investigating, yet.

If an agent holds a listing off the MLS without the informed consent of the homeowner, that could be a violation of real estate license law, Petit said. If the client signs off, then the situation is much less clear-cut.

The debate comes back to one question: Does the agent's decision to market a property in-house hamper, rather than help, the homeowner?

If so, Petit said, "I would strongly encourage people who have seen or believe they have information on that type of alleged activity to get the specifics to us. Get us some details so that we can look at them."

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